An Efficiency Study of the Securities Firms under the Zero-Sum Gains Constraint

• Main Authors: Fang, Chin-Yi, 方進義
• Other Authors: Hu, Jin-Li
• Format: Others
• Language: en_US
• Published: 2009
• Online Access: http://ndltd.ncl.edu.tw/handle/96327660973833068689

博士 === 國立交通大學 === 經營管理研究所 === 97 === Taiwan’s government has been actively promoting financial holding companies (FHCs), which offer various services including banking, securities and insurances. The issue of whether or not the FHC system can effectively improve a securities firms’ managerial efficiency is still not empirically studied. The lack of firm-level data has made research on securities firms (SFs) very difficult and rare to see, not to mention the effects of FHC on their managerial efficiency. Current studies that use traditional data envelopment analysis (DEA) neglect the 100% market share restriction. This study adopts zero-sum gains data envelopment analysis (ZSG-DEA) to measure the efficiency scores of SFs and indicates that the traditional DEA model underestimates the efficiency scores of inefficient SFs. This research analyses 266 integrated securities firms (ISFs) in Taiwan from 2001 to 2005 and employs three inputs (fixed assets, financial capital, and general expenses) and a single output (market share). All nominal variables are transformed by GDP deflator with 2001 as the base year. The foreign-affiliated ownership of SFs positively affects the efficiency scores. The two-stage least squares procedure (2SLS) confirms that the market share and efficiency score simultaneously reinforce each other. The four-stage DEA proposed by Fried et al. (1999) is then further applied. The securities subsidiaries under the law-induced FHCs are not the efficient ISFs in Taiwan. An FHC has a significantly negative effect on the managerial efficiency of an ISF. A higher duration of an ISF also significantly improves its efficiency score. Meanwhile, forming FHCs imposes a threat and creates the incentives for efficiency increasing in the securities industry.